Analysts expect good, not great results from Dell

SAN FRANCISCO (MarketWatch) -- Dell Inc. is scheduled to report its fiscal first-quarter results after the market closes May 29, and analysts, while upbeat about the PC giant's prospects, still believe it will be challenging for the company to translate market gains into revenue and earnings growth.

Analysts surveyed by FactSet Research estimate Dell
DELL
will earn 36 cents a share on $15.66 billion in revenue. During the same period a year ago, Dell earned 34 cents a share on sales of $14.6 billion.

Shaw Wu, of American Technology Research, holds a neutral rating on Dell's stock, and said that supply-chain checks suggest the company will post strong year-over-year growth on its PC and server units. However, Wu warned that lower average-selling prices for its products might continue to have an impact sales and profits.

The analyst pointed to how, during the company's January quarter, Dell grew unit shipments by 19% over the prior year, but its earnings missed analysts' consensus estimates by a penny a share and revenue by $300 million. "This was due to much lower than expected average-selling prices, indicating higher volume at the low end [of the market]," Wu wrote in a research note.

One of the problems facing Dell is that it needs to decide what kind of tech company it is going to be, according to Wu.

"Dell is in an identity crisis," he said. "It needs to figure out whether it wants to remain primarily a logistics company or become more of a technology provider like Hewlett-Packard, Apple and IBM."

While Wu remains cautious about Dell, Kathryn Huberty of Morgan Stanley raised her rating Friday on Dell's stock to overweight from equal weight.

Huberty said she expects Dell to report strong results on May 29, with signs of gains in the low end of the server market and growth in PC sales due to new retail and commercial initiatives.

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